Questions and Answers
What is the purpose of insurance?
Transfer Risk
Which of the following are basic types of coverage needed? (Select all that apply)
What is one way to save money on your premium?
What does liability insurance cover?
Signup and view all the answers
Which of the following are basic parts of auto insurance? (Select all that apply)
Signup and view all the answers
What factors can lead to a good deal on car insurance as a teen?
Signup and view all the answers
What should you consider when looking for auto insurance?
Signup and view all the answers
How can you save on health insurance premiums? (Select all that apply)
Signup and view all the answers
What does basic health insurance cover?
Signup and view all the answers
What is long term care insurance designed for?
Signup and view all the answers
What is disability insurance designed to do?
Signup and view all the answers
What is one component of identity theft protection?
Signup and view all the answers
Which of the following describes life insurance?
Signup and view all the answers
What type of insurance should generally be avoided?
Signup and view all the answers
Study Notes
Purpose of Insurance
- Transfers financial risk from individuals to insurers.
Basic Types of Coverage Needed
- Homeowner's or Renter's Insurance protects property.
- Auto Insurance covers vehicle-related risks.
- Health Insurance pays for medical expenses.
- Disability Insurance provides income replacement for disabilities.
- Long Term Care Insurance is essential post age 60 for care services.
- Identity Theft Protection safeguards against identity fraud.
- Term Life Insurance supports beneficiaries financially after death.
Saving on Insurance Premiums
- Raising deductibles lowers premiums; deductible is the out-of-pocket payment before coverage starts.
- Liability coverage is essential to cover damages to others in an accident.
- Consider dropping collision coverage for older vehicles.
Liability Coverage
- Covers costs for medical expenses and property damage to others if the policyholder is at fault in a car accident.
Basic Parts of Auto Insurance
- Medical Payment Coverage pays all accident-related medical bills.
- Collision Insurance covers vehicle damage from collisions.
- Comprehensive Insurance addresses non-collision damages like theft or natural disasters.
- Uninsured/Underinsured Motorist Protection covers injuries from uninsured drivers or hit-and-run incidents.
Car Insurance for Teens
- Maintaining good grades and completing driver education can reduce premiums.
- Comparison shopping among insurers helps find the best deal.
- Staying on parents' policy can be beneficial during college.
Key Insights on Auto Insurance
- Individual risk profiles determine premiums.
- Insurance rates vary significantly among providers.
- Focus on coverage quality over merely low price.
- Explore all available discounts.
- Insurers might not prioritize your interests during claims.
- Prepare thoroughly prior to filing a claim.
Reducing Health Insurance Premiums
- Increase deductible or coinsurance to lower premiums.
- Adjust the Stop-Loss limit carefully to manage maximum out-of-pocket expenses.
- Health Savings Accounts (HSAs) offer tax benefits and can complement high-deductible plans.
Basic Components of Health Insurance
- Basic Health Insurance covers hospital and physician expenses.
- Major Medical Expense Insurance addresses high-cost medical bills.
- Dental and Eye Insurance only covers specific dental and vision expenses.
- Copayment requires a fixed fee per service.
- A deductible must be met before benefits kick in.
Long Term Care Insurance
- Provides coverage for nursing homes and in-home care.
- Recommended to purchase after age 60.
- Over 69% of individuals over 65 will need long-term care.
Disability Insurance
- Replaces income lost due to short-term or long-term disability.
- Opt for policies that cover occupational issues (unable to perform trained job).
- Short-term disability needs managed through savings and budgeting.
- Employer-offered plans are typically more affordable.
- Coverage should aim for 65% of current income.
- Elimination Period affects premium costs; longer periods lower premiums.
Identity Theft Protection
- Restoration services should include personal counsel for managing identity theft.
- Avoid plans that only offer credit monitoring services.
Life Insurance Overview
- Beneficiaries receive payouts upon the insured's death.
- Life Insurance replaces lost income to support dependents.
- Two types:
- Term Life Insurance is cheaper and straightforward.
- Cash Value Life Insurance is costlier, includes savings component.
- Self-Insurance is a strategy of saving and investing to avoid dependence on insurance.
- Level Term provides consistent payment over the term.
Insurance Types to Avoid
- Credit life/disability coverage pays off debts upon the borrower's death or disability.
- Credit card protection ensures credit card balances.
- Cancer and hospital indemnity insurance provide limited coverage against health risks.
- Accidental death insurance is limited as it covers only specific incidents.
Studying That Suits You
Use AI to generate personalized quizzes and flashcards to suit your learning preferences.
Description
Explore the key concepts of insurance in this Chapter 9 flashcard quiz. Learn about the purpose of insurance, the essential types of coverage, and strategies to save on premiums. Perfect for anyone looking to enhance their knowledge of insurance basics.
